New York Life Ins. v. Russell

CALDWELL, Circuit Judge, having stated the case as above, delivered the opinion of the court. The applications for the insurance were made in Nebraska to a local agent doing business for the defendant company in that state, and the policies were delivered to the insured, and the premiums paid there. A statute of that state provides: “Any person or firm in this state who shall receive or receipt for any money, on account of or for any contract of insurance made by him or them, or for any such insurance company or individual aforesaid, or who shall receive or receipt for money from other persons, to be transmitted to any such company or individual aforesaid, for a policy or policies of insurance or any renewal thereof, although such policy or policies of insurance may not be signed by him or them, as agent or agents of such company, or who shall in any wise, directly or indirectly, make or cause to be made any contract or contracts of insurance, for or on account of such company aforesaid, shall be deemed to all intents and purposes an agent or agents of such company, and shall be subject and liable to all the provisions of this chapter.” Comp. St Neb. 1893, c. 16, § 8. Under this statute, the policies in suit must be regarded as Nebraska contracts, to be governed and construed by the laws of that state, notwithstanding the clause in the applications “that the contract contained in such policy and in this application shall be construed according to the law of the state of New York, the place of said contract being agreed to be the home office of said company, in the city of New York.” Wall v. Assurance Soc., 32 Fed. 273; Fletcher v. Insurance Co., 13 Fed. 526; Ehrman v. Insurance Co., 1 McCrary, 123, 1 Fed. 471; Berry v. Indemnity Co., 46 Fed. 439; Assurance Soc. v. Clements, 140 U. S. 226, 11 Sup. Ct. 822; Indemnity Co. v. Berry, 4 U. S. App. 353, 1 C. C. A. 561, and 50 Fed. 511. The clause of the Nebraska statute which we have quoted came before the supreme court of that state for construction and application in the case of Insurance Co. v. Jordan, 29 Neb. 514, 45 N. W. 792. The agent of the insurance company, in answer to material questions in the application, wrote down false answers. The insured could not read, and claimed the answers had not been read to him. The application, which was signed by the insured, warranted the answers to be true. The court said: “The attorneys for the insurance company contend that notwithstanding the fact that the application was filled out by an agent of the company, and the inability of Jordan to read, still he is bound by the terms of the application. Richmond was the agent of the insurance company, and, as such, represented it in filling out the application; and if he made out the same without inquiry as to the facts, or incorrectly, when the facts were stated to him correctly, the company will be bound thereby. Under our statute, an agent of an insurance company, in order to do business for his company in the state, must procure from the state auditor a certificate of authority showing that such company has complied with all the requirements of the law. This certificate must be renewed annually, and heavy penalties are provided for a failure to comply with the statute in this regard. Comp. St. c. 43, §§ 2A-27. The agent of an insurance company authorized to — 101 — procure applications for insurance, and to forward them to the company for acceptance, are the agents of the insurers, and not of the insured, in all they do in preparing the applications, or as to any representations they may make to the insured as to the character and effect of the statements so made. Kausal v. Association, 31 Minn. 17, 16 N. W. 430; Insurance Co. v. Gray, 80 Ill. 28; Mullin v. Insurance Co., 56 Vt. 39; Insurance Co. v. Weill, 28 Grat. 389; Ring v. Insurance Co., 51 Vt. 563. Public policy and good faith require that the persons clothed by the insurance companies with power to examine proposed risks, and fill out, receive, and approve applications for insurance, shall bind their principals by their acts and knowledge acquired by them.” And in a later case (Insurance Co. v. Fallon [Neb.] 63 N. W. 860, 861) the court said: "Indeed, counsel for the insurance company frankly admit that there are many decisions .holding tlmt where a party applies .to an agent for insurance, and correctly stares tjie facts, the company is liable, although the agent may not write in the, application the answers given by the insured. Insurance Co. v. Jordan, 29 Neb. 514. 45 N. W. 792, recognizes this principle. It is true that in that case it appeared that the insured was unable to read. But we do not think the distinction in (he cases material. When the insured states the facts correctly to the company’s agent, he is not bound to exercise vigilance thereafter to determine whether the agent is exercising care or good faith in his transactions on behalf of the company. In other words, the company is estopped from seeking to avoid its contract because of a mistake or fraud committed by its own agent, the insured haying acted in good faith, although, perhaps, somewhat negligently.” Under the Nebraska statute and the decisions of tbe supreme court of that state which we have cited, this case is on all fours with tbe case of Insurance Co. v. Chamberlain, 132 U. S. 304, 10 Sup. Ct. 87. The Iowa statute on which that case was made to turn is the same in legal effect with the Nebraska statute, and tbe terms, conditions, and warranties contained in tbe application and policy in lha t case are, in substance and effect, identical with those contained in the policies in suit. We have set out the conditions of ¡he applicaiions and policies in this case in the statement, and, that it may be seen that they are identical in legal effect with those contained in the application in the Chamberlain Case, we here extract from the report of that case the conditions of the application. The application contained these clauses: “And it is hereby covenanted and agreed lhat the statements and representations contained in this application and declaraiion shall be the basis of, and form part of, the contract of policy of insurance between the said party or parties signing this application and the said Continental Life Insurance Company, which statements and representations are hereby warranted to be tme, and any policy which may be issued upon this application by the Continental Life Insurance Company, and accepted by the applicant, shall be so issued and accepted upon the express condition that if any of the statements or representations in this application are in any respect untrue, or if any violation of any covenant, condition, or restriction of the said policy shall occur on the part of the party or parties signing this application, then the said policy shall be null and void, and all moneys which may have been paid on account of said policy shall be forfeited to the said company. “And it is hereby further coveuanied and agreed that the officers of the said company at the home office of the said company, in Hartford, Conn., alone shall have authority to determine whether or not the policy of insurance shall be issued on this or any application, or whether or not any insurance shall take effect under this or any application. “And it is hereby further covenanted and agreed that no statements or representations made or given to IhS person soliciting this application for a policy of insurance, or to any other person, shall be binding on the said company, unless — 102 — such statements or representations be in writing in this application when the said application is received by the officers of the said company at the home office of the said company in Hartford, Conn.” Among the “Provisions and Requirements” printed on the back of the policy are the following: “(11) The contract between the parties hereto is completely set forth in this policy and the application therefor, taken together; and none of its terms can be modified, nor any forfeiture under it waived, except by an agreement in writing, signed by the president or secretary of the company, whose authority for this purpose will not be delegated. “(12) If any statement made in the application for this policy be in any respect untrue, this policy shall be void, and all payments which shall have been made to the company on account of this contract shall belong to and be retained by the company.” The terms of the applications vary slightly in arrangement and phraseology, but not at all in their legal effect. In the Chamberlain Case the question was, as it is here, as to the effect of a false answer to a material question in the application. The agent of the company had written down the answer, and assured the applicant that it was the proper answer to make to the question, after the insured had made a full and truthful statement of the facts tc the agent. The supreme court said: “Among the numerous questions propounded in the application was the following: ‘Has the said party [the applicant] any other insurance on his life? If so, where and for what amounts?’ The answer, as it appears in the application, is: ‘No other.’ That answer, as were all the answers to questions propounded to the applicant, was written by the company’s agent Boak. In reference to the above question and answer, the latter testified: “I asked him [Stevens] the question if he had any other insurance, as . printed in the application, and as we ask every applicant; and he told me he had certain certificates of membersh'p with certain co-operative societies, and he enumerated different ones, and said he did not know whether I would consider that, insurance or not. I told him emphatically that I did not consider them insurance, and we had considerable conversation about it. He wanted to know my authority for saying 1 did not consider them insurance. I gave him my authority, — gave him my reasons; and he agreed with me that these co-operative societies were in no sense insurance companies, and in that light I answered the question “No.” Q. Did 5rou tell him at the time that the proper answer was “No.” after he had stated the facts? A. I did. Q. Who wrote the answer in there? A. I did.’ * * * Is the insurance company estopped, under these circumstances, to dispute its liability upon the policy? This question the plaintiff insists must receive an affirmative answer, upon the authority of Insurance Co. v. Wilkinson, 13 Wall. 222, Insurance Co. v. Mahone, 21 Wall. 152, and Insurance Co. v. Baker, 94 U. S. 610; while the defendant contends that the case of Insurance Co. v. Fletcher, 117 U. S. 519, 6 Sup. Ct. 837, requires it to be answered in the negative. An extended statement of those cases is not necessary, and therefore will not serve any useful purpose; for the present case can be determined upon its special facts, and upon grounds that did not ex-ist in any of the others. “By the first section of an act of the legislature of Iowa, approved March 31, 1880, entitled ‘An act relating to insurance and fire insurance companies’ (Laws Iowa, 1880, p. 209, c. 211), it is provided that ‘any person who shall hereafter solicit insurance, or procure applications therefor, shall be held to be the soliciting agent of the insurance company or association issuing a policy on such application, or on a renewal thereof, anything in the application or policy to the contrary notwithstanding-.’ * * * This statute was in force at the time the application for the policy in suit was taken, and therefore governs the present case. It dispenses with any inquiry as to whether the application or the policy, either expressly or by necessary implication, made Boak the agent of the assured in taking such application. By force of the statute! he was the agent of the company in soliciting and procuring the application. He could not, by any act of — 103 — Ms, shako off ffie character of agent for the company, isor could the, company, by any provision in the aimlioaiion or policy, convert him into an agent of the assured. If it conld, Ilion the object of ¡he statute would be defeated. In his capacity as agent of tlio insurance company, he filled up the application, — something that he was not bound to do, but which service, if lie chose to render it, was within the scope of his authority as agent. If it be said that, by reason of his signing the application, after it had been prepared, Stevens is to be held as having stipulated that the company should not be bound by Ills verbal statements and representations to its agent, he did not agree that the writing of the answers to questions confirmed in the application should be deemed wholly his act,- and not, in any sense, the act of tlio company, by its authorized agent. His act in writing the answer, which is alleged to be mi true, was, under fine circumstances, the act of the company. If he laid applied in person to the home office, for insurance, stating in response to the question as to other insurance the same facts communicated by him to Boafe, and the company, by its principal officer, having authority in file premises, liad then written tlio answer. ‘No other.’ telling the applicant 1ha1 such was the proper answer to be made, it, could not be doubled that the company would be estopped to say that insurance in co-operative societies was insurance of the kind to which the question referred, and about which it desired information before consummating the contract. The same result must follow where negotiations for insurance are had, under like eiicumstaneos, between the assured and one who iu fact, and by force of the law of the state where such negotiations take place, is the agent of the company, and not, in any sense, an agent of the applicant. * * * ‘No other,’ having been written by'its own agent, invested with authority to solicit and procure applications, to deliver policies, and, under certain limitations, to receive premiums, should he held as properly interpreting both the question and the answer as to other insurance.” The ruling of the supreme court in the case of Insurance Co. v. Chamberlain, supra, is decisive of the case at bar. It is extremely difficult to reconcile the case of Insurance Co. v. Fletcher, 117 U. S. 519, 6 Sup. Ct. 837, with the previous cases in that court of Insurance Co. v. Wilkinson, 13 Wall. 222, Insurance Co. v. Trefz, 104 U. S. 197, Insurance Co. v. Mahone, 21 Wall. 152, Insurance Co. v. Baker, 94 U. S. 610, Eames v. Insurance Co., Id. 621, and the later case of Insurance Co. v. Chamberlain, supra; and it confessedly is not in accord \\ ith the great majority of the state decisions. If the Fletcher Case is in conflict with the Chamberlain Case, then it must be held to bo overruled by the later case. Whether overruled or not, it has no application to this case. In this case we are not called upon to inquire whether the Fletcher Case is still to be regarded as a binding authority on the federal courts in states which have not, by legislation, definitely fixed the relation which insurance companies sustain to those persons who solicit and take applications for insurance for them. Where that relation is declared by statute, as it is in Nebraska and some other states, to be that of principal and agent, the Chamberlain Case is an express authority that the Fletcher Case has no application. The courts long ago decided that the agents of insurance companies authorized to solicit and receive applications for insurance, and to forward them to the companies for acceptance, must be deemed the agents of the insurance companies in all they do in preparing the applications, and in any representations they make to the insured as to the character and effect of the statements therein contained, and that the companies would be held to a knowledge of all statements, representations, and information given by the insured, when making the application, to the agent, respecting the subject104 matter of the insurance. In a word, the courts applied to the relation between the insurance companies and their agents the well-settled rule of agency that all acts performed and all knowledge acquired by an agent in the conduct of the business of his agency are the acts and knowledge of the principal. After this doctrine had been established, the insurance companies, in order to evade it and escape liability for the acts and knowledge of their agents in the due prosecution of the business of their agencies, inserted in their applications and policies a provision to the effect that 'the persons soliciting or taking the application should be deemed the agent of the insured, and not of the insurer. This effort of the insurance companies to avail themselves of all the benefits of carrying on their business in the only way it could be carried on, through agents, and at the same time escape all the obligations and liabilities that attach to a principal who commits the conduct of his business to an agent, proved unavailing. The courts held that an insurance company could not convert its agent into an agent for the insured by merely calling him such in the application or policy. Insurance Co. v. Wilkinson, 13 Wall. 222; Insurance Co. v. Norton, 96 U. S. 234; Kausal v. Association, 31 Minn. 17, 16 N. W. 430; Insurance Co. v. Parsons, 47 Minn. 352, 50 N. W. 240; Follette v. Association, 107 N. C. 240, 12 S. E. 370; Association v. Matthews, 65 Miss. 312, 4 South. 62; Insurance Co. v. Harvey, 82 Va. 949, 5 S. E. 553; O’Brien v. Insurance Co., 52 Mich. 131, 17 N. W. 726; Eilenberger v. Insurance Co., 89 Pa. St. 464; Wheaton v. Insurance Co., 76 Cal. 415, 18 Pac. 758; Insurance Co. v. Capehart, 108 Ind. 270, 8 N. E. 285; Stone v. Insurance Co., 68 Iowa, 737, 28 N. W. 47; Meyers v. Insurance Co., 156 Pa. St. 420, 27 Atl. 39; Insurance Co. v. Myers, 55 Miss. 479; Sprott v. Association, 53 Ark. 216, 13 S. W. 799. Without saying in terms that the agent of the company shall be deemed the agent of the insured, the application in this case declares that: “No statements, representations, promises, or information made or given by or to the person soliciting or talcing this application for a policy, or by or to any other person, shall be binding on said company, or in any manner affect its rights, unless such statements, representations, promises, or information be reduced to writing, and presented to the officers of said company, at the home office, in this application.” The obvious purpose of this clause, like that which declared the agent of the insurance companies should be deemed the agent of the insured, is to enable the insurance company to escape from the necessary obligations and liabilities imposed by the law of agency on a principal who commits the conduct of his business to an agent. It is designed to evade a fundamental rule of the law of agency, and to shear its acknowledged agents of their appropriate and accustomed powers and duties, and impose them on the insured. If this application is to receive the construction contended for, no one can safely transact business with an agent of the company; for, -while he would be bound by his acts and representations and any information communicated to him by the agent, the company will — 105 — not be bound by tlie acts or representations of its agent or any information communicated to Mm in the conduct of the business of his agency. Under such a rule, the rights and obligations of the contracting parties would not be reciprocal; contracts made with the company’s agents, would he one-sided; and the company could, at its own election, avail itself of the acts and representations of its agents when it "was profitable to do so, and repudiate them when they were likely to prove burdensome. The company cannot play fast and loose in this manner. The persons who are authorized by the company to solicit insurance, take applications, or receive premiums in Nebraska are made by statute the agents of ¡.lie company “to all intents and purposes”; and it is not in the power of the com-' pany to shear these statutory agents of the powers and authority with which the law, for the protection of the public dealing with the company, invests them. These powers are precisely those which an agent of an insurance company possesses, upon whose powers and authority no special limitations have been imposed. The Iowa statute is similar to the Nebraska statute, and the supreme court, in Insurance Co. v. Chamberlain, supra, said: “This statute was in force at the time the application for the policy in suit was taken, and therefore governs the present case. It dispenses with any inquiry as to whether the application or the policy, either expressly or by necessary implication, made Boak the agent of the assured in taking such application. By force of the statute, he was the agent of the company in soliciting and procuring the application. He could not, by any act of his, shake off the character of agent for the company; nor could the company, by any provision in the application or policy, convert him into an agent of the assured. If it could, then the object of the statute would be defeated.” Insurance companies perfectly understand the fact that these applications, which are framed by themselves, and furnished to their agents, are filled up, and the answers to the questions written down, by their agents, and that every applicant accepts without question the advice, direction, and assurance of the agents in all matters relating to the preparation of the application. This is a part of the duty of such agents, and the applicant has a right to assume that they will discharge it intelligently and honestly. He has a right to assume, also, that the agent will honestly and faithfully discharge his duty to his principal. In this case it was the duty of the company’s medical examiner to make the report called for by the clause of the application last quoted, if the answer to the question and the information communicated to the medical examiner made such report necessary. This was a duty required of the medical examiner by the company. It would be unprecedented and unreasonable for an applicant to take into bis own hands the preparation of the medical examiner’s report, and, in doing so, disregard the express advice and direction of the company’s medical examiner. In considering this question, the supreme court of Texas said; “Tbe answers are usually ‘Yes’ or ‘No,’ and, from the space allowed for them in the form used, it is evident they are required to be monosyllabic. He had undertaken to make true answers; and he must be presumed to have known that the object of having them written down was to furnish information to the absent — 106 — officers of the corporation of material importance to them in determining whether or not they would execute the contract. Whore there were no circumstances to excite his suspicion to the contrary, we see no reason, however, why he may not have trusted to the medical examiner’s correct and honest performance of his' duty. We do not'think his contract or the exercise of ordinary prudence demanded of him to assume that there was any want of capacity, care, or honesty on the part of the medical examiner, or made it his duty to assume the exercise of a supervisory power over the work of that officer. As a general rule, no doubt, the subjects of insurance will be but little qualified for such a task.” Assurance Soc. v. Hazlewood, 75 Tex. 348, 12 S. W. 621. In Michigan, where the applicant answered truthfully, and a medical examiner of the company wrote down an erroneous answer, the court said: “If it is true that Dr. Carstens, acting as agent of the company, assumed to do this, the order is not in a position to claim that the answers were untrue.” Pudritzky v. Supreme Lodge, 76 Mich. 428, 43 N. W. 373: And in Arkansas the rule is that: “When a medical examiner, authorized by an insurance company to fill up blanks for answers to questions to be propounded to applicants for insurance in a medical examination, or to fill them up is within the apparent scope of his authority, does so by writing false answers, and thereafter procures the signature of the applicant thereto, after he had given correct answers to the questions, and the company afterwards receives the premiums, and issues a policy, the company will, upon the death of the insured, be estopped from insisting on tbe falsity of tbe answers, although warranted to be true.” Per Battle, J,. Assurance Soc. v. Reutlinger, 25 S. W. 835, citing Insurance Co. v. Brodie, 52 Ark. 11, 11 S. W. 1016; Flynn v. Insurance Co., 78 N. Y. 568; Grattan v. Insurance Co., 80 N. Y. 281, 92 N. Y. 274; Insurance Co. v. McMurdy, 89 Pa. St. 363; Pudritzky v. Supreme Lodge, 76 Mich. 428, 43 N. W. 373; Insurance Co. v. Hazlewood, 75 Tex. 348, 12 S. W. 621. This is the doctrine laid down by this court in Insurance Co. v. Robison, 19 U. S. App. 206, 7 C. C. A. 444, and 58 Fed. 723. Under the Nebraska statute, tbe agents and medical examiner of the defendant company were “to all intents and purposes” the agents of the company; and, in their respective spheres, they possessed all the powers and authority conferred on agents and medical examiners of insurance companies by an unqualified appointment as such. It results that the information communicated by the applicant to the company’s agents and medical examiner was, in contemplation of law, communicated to the company itself; and the company, therefore, having issued the policy with knowledge of all the facts, will not be heard to defend upon the ground that these facts were not fully set out in the report of its agents or medical examiner. We concur fully in the conclusion reached by tbe learned judge who tried the case at the circuit, whose opinion is inserted in the statement of the case. The judgment of the circuit court is affirmed.